JAPAN: Soaring yen could drive Honda offshore
Honda has threatened to move more production and research and development, and perhaps even its headquarters, offshore unless the Japanese government takes steps to reduce the value of the yen against the US dollar.
Chief executive Takeo Fukui told a small group of reporters in Tokyo on Friday the strong yen could cripple Japanese industry and spur massive layoffs, and added the automaker would be forced to send more production overseas if the dollar persisted below JPY100.
"If the government is saying, "We don't care about the export industry', then that's fine - we'll act accordingly," he told Reuters.
Honda had earlier reduced its operating profit forecast two-thirds to JPY180bn (US$2bn) for fiscal year 2008/9 on estimated currency losses of twice that.
Fukui told reporters Honda had set long-term business plans at what was until recently a cautious assumption of a 100-yen dollar, and that any level below that would necessitate a fundamental rethink of the way the company operates.
"If we go beyond (JPY100), we would simply have to transfer more production overseas, cut more temporary workers and even start laying off permanent jobs," he said.
"Beyond that we could switch to importing more cars into Japan, bring research and development facilities overseas, and in an extreme scenario move our headquarters offshore. It would cause nothing short of a hollowing out of Japanese industry."
Reuters said the Bank of Japan on Friday cut its key policy rate to 0.10% and took other steps aimed at easing corporate credit strains but the dollar budged little, briefly falling below pre-announcement levels under JPY89.
Fukui reportedly said Honda was determined to meet its new profit forecasts after issuing its third profit warning this week.
It has changed its dollar-yen assumption for the second half to JPY95 but the assumption for the final January-March quarter factored in a rate of about JPY90 and presented little risk for now.